What Is Productivity?

What is productivityProductivity is the ratio of output generated to the inputs consumed. It is the increase or decrease of outputs or value-added generated from a production or service system by a given level of inputs. It focuses mainly on efficiency (doing things right) and effectiveness (doing the right things). A growth in productivity implies that either more output is produced with the same amount of inputs, or that less input is required to produce the same level of output. In effect, productivity becomes the attainment of the highest level of performance with the lowest possible expenditure of resources.

Productivity = Output / Input

All definitions of productivity are centred on “outputs” and “inputs”. Outputs tend to be in the form of goods (if visible) and services (if invisible). On the other hand, inputs are less 

easily defined and have to be classified into labour (human resources), capital (physical and financial), energy, data and materials.

Productivity as a concept can assume two (2) dimensions: total/multi factor productivity and single/partial productivity. The former refers to productivity that is defined as the relationship between the output produced and a combination of inputs (basic resources, most notably labour, capital goods and natural resources). The latter measure expresses how efficiently an entity is utilising a single factor of production within the production of its outputs. For example, if output is associated with man-hours or labour, this would be partial productivity or specifically labour productivity. It is not surprising that this is the most popular estimate of productivity because it relates output to the single most important factor of production – labour and also offers a proxy for how efficient the other inputs such as capital and technology are being used.